Although the company blamed a woeful combination of a weak economy, bad weather and product shortages, other retailers had far less trouble overcoming winter storms and consumer worries, with Macy's Inc
Ugly is good way to term it, said FTN Equity Capital Markets analyst Anthony Chukumba. I'm extremely disappointed, as I'm sure investors will be. I think it really hurts management's credibility.
GameStop said sales for the holiday period totaled $2.86 billion, little changed from a year earlier when consumers were staggering through some of the worst moments of the recession. By contrast, GameStop previously had issued relatively upbeat comments about sales, saying they were off to a strong start.
But while new videogame software sales rose 4 percent -- due to hot titles like Call of Duty: Modern Warfare 2 from Activision -- sales of hardware, such as game consoles, dropped a steep 8 percent.
Shortages played a role, the company said, citing products such as Sony Corp's <6758.T> PlayStation 3, Nintendo Co Ltd's<7974.OS> Wii, and the game New Super Mario Bros Wii.
To some extent, the shortages make sense, given a broader move by retailers to keep inventories lean after a tough year, particularly when it came to consoles analyst said. But the inventory issue also raised concerns among some.
I don't know how you end up with shortages of Super Mario Wii, Sean McGowan, an analyst with Needham & Co. You know you're going to sell this game, just make a gazillion of them.
Competition likely also hurt GameStop, even with its major footprint in the industry. One red flag was raised in December, when Wal-Mart Stores Inc
It was very disappointing, McGowan said of the sales results. The Wal-Mart competition had to have some impact. It was an especially competitive environment across a lot of sectors.
Given the weaker-than-expected holiday period, the company cut its profit forecast for the fourth quarter. GameStop expects to post earnings of $1.25 to $1.29 a share, well below analysts' average view of $1.57 a share, as reported by Thomson Reuters I/B/E/S.
That forecast is also below its own previous expectation of fourth-quarter earnings per share of $1.47 to $1.65.
Same-store sales in the quarter are expected to fall 8.5 percent to 9.5 percent.
GameStop shares were down 16 percent, or $3.81, to $20.22 on the New York Stock Exchange. Shares hit a low of $19.43 earlier in the session, its lowest level since December 2008.
(Reporting by Paul Thomasch; Editing by Derek Caney and Maureen Bavdek)